Optimal Monetary Policy under Sticky Price: Two Country Model

• Main Authors: Zhong-Mou Dou, 都中謀
• Other Authors: Ming-Jen Chang
• Format: Others
• Language: en_US
• Published: 2008
• Online Access: http://ndltd.ncl.edu.tw/handle/am96zc

碩士 === 國立東華大學 === 國際經濟研究所 === 96 === ABSTRACT This study investigates the optimal monetary policy with alternative sticky price in a two-country economy. The framework of two-country model is based on the Obstfeld and Rogoff (1996). The purpose of this work is to detect real effect of the optimal monetary policy in the economy after external shocks. Following Chari, Christiano, and Kehoe (1991), Schmitt-Groh´e and Uribe (2004)’s study, when the price is flexible, the optimal monetary policy in closed economy is near Friedman rule. Our findings also support this conclusion in open economy. Furthermore, we show the variability in our optimal monetary economy is modest low rather than that under the conventional Taylor rule.